Football's Financial Own Goal

A radical new approach is needed to sort out the finances of football and stamp out potential abuse from allowing in investors who are not fit to be part of our game. These ideas are the driving force behind the Football Financial Transparency Bill I introduced to the House of Commons this week.

We have seen too many high profile clubs, like Leeds United, Glasgow Rangers and Portsmouth run into the ground by bad financial management. The consequences of this are not just damage to the reputation of the game and heartache to fans, but millions of pounds of taxpayers money lost in unpaid taxes and local businesses who work with the club facing big loses from unpaid bills.

Two key reforms should be a priority. First to get rid of the Football Creditors rule which means that when a club goes into administration, it has to pay its football debts in full while other people it owes money to get just pence in the pound. All debts should be paid equally; this would mean that a club would want to make sure that another club it is selling a player to really has the money to pay. It would also make players question whether a club could really meet their high salary demands, and would give the football authorities an extra incentive to ensure that clubs have the resources they need to complete the playing season.

The other key area of reform is to give the newly proposed Football Association Regulatory Authority some real teeth by creating an obligation for all investors in football clubs to have to declare their interest in the club itself and any of its major assets or liabilities. I am proposing that the football authorities should have the power to take this up with a club's bankers and if they are not satisfied with the response refer the matter to the tax and financial regulatory authorities.

This will mean that we avoid the old situation with Leeds United, and the current situation with Coventry City where people simply don't know who the owners are. It will also help us address a more concerning aspect of the opaque nature of football finance. A report published in 2009 by the Financial Action Task Force, based on research taken across 25 countries, including England, indentified over 20 cases of money launderings through the football sector, ranging from simple case of smuggling large amounts of cash that seem to be derived from illegal transactions, to complex international money laundering cases.

In particular the report noted that "football clubs are indeed seen by criminals as the perfect vehicles for laundering money". It went on to say that "the targets are frequently clubs in financial trouble looking for lifesaving" sponsors", and that "the lack of regulation or control over legal structures and the ownership or control of football clubs means that they are easy to acquire."

Further to this there is already an established practice of player ownership funds buying the controlling interest in a player at a club in say South America, and moving them onto a European club, with a view to a further transfer to a top club at a time of the choosing of the player fund. Even if third party ownership is banned in the final destination country, this financial interest could be hidden by agreements to pay agents, or for payback clauses to the selling club. In a recent survey conducted amongst players in Eastern Europe and the former USSR by FIFPro, they found 40% of footballers said that their salaries were not paid by the club they played for. That is why my bill also calls for a register to be available to the football authorities for any financial ties third party's have to players at a club.

It is also at the heart of one of the big problems in football, that money is made by some people from the margin they take on simply buying and selling players and other services. Often they can set an entirely arbitrary price as there is little way of determining their real value. For these people this is how they take money from the game, and often the ownership of a club is not about the fame and glory, but simply a means of accessing and influencing this lucrative market.